A Substantial Economic Slowdown Expected in the US in 2022

The United States economy is battling a slowdown as it heads to the last quarter of the 2021 economic calendar. According to economic projections conducted by Goldman Sachs (GS), sticky inflation and supply bottlenecks are the reasons that will contribute to the slowed economic growth in 2022. Goldman Sachs Chief Economist, Jan Hatzius, said that growth is slowing. He also added that the US is past its peak (growth) rate. Earlier in the year, GS estimated that the final 2021 GDP growth would be at 5.7%. However, this figure has been cut to 5.6%. The group also projected 2022 GDP at 4% from the previous projection of 4.4%.  The Conference Board, a non-profit research group, also shared their forecast, revealing an annual GDP of 5.6% in 2021, and 3.8% in 2022. 

Economic hardship

A Substantial Economic Slowdown Expected in the US in 2022

Goldman Sachs cited unpredicted economic hardship in the US as the key attribute to the impending decline in economic growth. Other factors also contribute to the projections of the US economic growth. 

The pandemic has been at the center of this economic discussion with its effects largely to blame for the projected slow growth of the economy. Both Goldman Sachs and The Conference Board agree that consumer services that are sensitive to the COvid-19 virus are prolonging the dragging of the economy. 

Another major mention is the semiconductor supply that is projected to remain stagnant until the half of 2022. This delays inventory restocking, which is taking a toll on the economic progress. 

Effect on industries 

Nearly all companies will be affected by this economic projection. In the trading industry, trading US indices via apps will be informed by these projections. Companies in the manufacturing industry that rely on semiconductors will have to hold persevere longer as the world grapples with the global shortage of semiconductors.   

‘Not yet normal’

About 70% of the GDP is consumption. This means that the US economy relies on consumption to fuel growth. Consumption of goods and services fell during the Covid-19 outbreak. The lockdown and other restrictions imposed were the primary causes of the sharp fall in consumption. 

The economy has not yet recovered to the high level of 2019 since the first restrictive measure was initiated. Many industries are reporting slow growth, which represents a downside to the overall outlook of the US economy. The expected new normal has not yet been experienced by most people, thus hindering their consumption powers. 

Low home sales in 2022

After a brief period of stagnation in 2020, the housing market came back roaring late in summer. It is one of the sectors that have been performing relatively well since the peak of the pandemic. But projections show that demand for housing in 2022 will be a concern. Home prices are set to be pushed higher by the low housing stock levels. This will reduce the demand, which will affect the economy negatively. If the projections by Goldman Sachs are anything to go by, then economists are facing another year of uncertainty in the US.

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